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Negotiation Auction Game

In the Negotiation Auction Game an amount of money is auctioned to a room of players. We recommend $10, but the game can be run successfully with either $1 or $100 ($100 is recommended only if your room consists of executives). For the purpose of this negotiation game, we are going to assume an auction of a $10 note. Start at 5% of the value - so in this example ask for a bid of 50 cents.

The twist in this negotiation game is that the highest and second highest bidders must both pay their final highest bid amounts; but only the highest bid wins the $10 prize money. Many negotiation skills training courses use this negotiation game near the start of the course.

What normally happens?

In the overwhelming majority of games, both the highest and second highest bidders will pay in excess of the amount you're auctioning. In many cases you'll collect in excess of $100 from both parties! (i.e. $200 in total) Bids normally start off from all 4 corners of the room, rapidly pushing the price up from 50 cents. Between the $5 and $10 range, you'll normally have just 2 players left in the game. You'll likely get a laugh from the room when bidding exceeds $10. You won't need to prod either player to carry on, but you can question them and give them extra time to consider before ending the negotiation auction by counting down from 3 to 1.

Why pay so much?

Players are attracted at the prospect of winning $10 for a small upfront investment.

Players are later trapped near the $10 level by not wanting to lose their $10 bid. They hope that the other side will back down after they place their next bid, allowing them escape with a minimum loss.

Ego also plays a role - with neither side wanting to back down in front of their colleagues. The limbic emotional part of the players brains overrules the higher thinking cortical part of the brain.

Additionally, we want to remain consistent with our earlier commitments. Backing down would mean admitting that we were fools to enter the bidding war in the first place. Often this results in winning at any cost.

Lessons

Although the game is fun, the lessons extracted in the discussion afterwards are where your gold lies. Discuss the above 4 motivators.

Ask how the irrational escalation could have been avoided early on.

Ask how the position could have been minimised at the $10 level. It's likely that players will suggest ideas such as a quick discussion between the 2 highest bidders whilst the auction is still open, with an agreement to share the winnings and an end to bidding.

Ask about the various meanings that 'winning' can have.

Ask how these lessons apply to your organization's negotiations and difficult relationships.

Ethics and Fairplay

We recommend that after your group discussion, you donate the excess money collected to your favourite charity (Please choose a worthy charity, and not a drug company's cancer research project). By donating to a charity organisation, your facilitator will gain trust and not risk being resented for having personally benefited.